WASHINGTON (Reuters) - The U.S. Senate late on Thursday approved a broad energy bill to increase the fuel efficiency of U.S. cars and trucks by Congress for the first time since 1975 and significantly boost production of renewable motor fuels like ethanol.

Senate Democrats dropped from the bill about $13 billion in taxes on big oil and gas companies to avoid a White House veto of the measure and appease Republicans who were ready to filibuster the legislation.

The modified bill was approved 86 to 8 and now goes to the full House of Representatives for a vote, expected next week, on the changes the Senate made to the legislation. If approved by the House, as is likely, the measure will then be sent to President George W. Bush.

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Shortly after the Senate vote, the White House said the president would sign the bill into law.

The legislation would raise fuel efficiency of cars and trucks by 40 percent to an average 35 miles per gallon by 2020, cutting U.S. oil demand by 1.1 million barrels a day.

Passenger cars now must get 27.5 miles a gallon and minivans, SUVs and other light trucks get 22.2 miles a gallon.

Senate Majority Leader Harry Reid said the legislation "will save consumers money, it will begin to reverse our addiction to oil, and it takes a small first step in our fight to turn the tide of global warming."

The bill would also boost U.S. production of renewable motor fuels like ethanol by five fold to 36 billion gallons a year by 2022, which is widely supported by lawmakers from farm states as most U.S. ethanol is now made from corn.

"The new fuel economy standards and the increase in renewable fuels represent a step forward in our common effort to make America more energy independent," said Senate Republican Leader Mitch McConnell.

In a vote earlier in the day, Senate Democrats failed to block a filibuster of the bill by mostly Republicans unhappy with the taxes proposed on the oil sector.

Fifty-nine senators voted to limit debate on the bill, just one short of the 60 lawmakers needed out of the chamber's 100 members to stop a filibuster.

Senate Republicans sought a filibuster to force the bill to be modified to satisfy the White House, which had threatened to veto the measure, in part, over the taxes it would levy against big energy companies, like Exxon Mobil.

Democrats already had dropped from the bill a plan to require utilities to generate 15 percent of their electricity from renewables like wind or solar power because of White House opposition.

Without the billions of dollars in new oil industry taxes, Democrats did not have the money to pay for an extension of a tax credit for companies that produced electricity by wind power and the provision had to be removed from the bill.

Democrats slammed Republicans and the White House for siding with oil companies, which they said didn't need any help from the federal government, with oil at high prices and the billions of dollars in record profits earned by the companies.

"With $90-a-barrel oil, why in the world do they need a federal subsidy?" said Assistant Senate Majority Leader Richard Durbin. "The oil companies now are celebrating in their boardrooms."

The industry didn't get off tax free. The bill would increase the time that big oil companies would have to take to write off certain energy exploration costs from five to seven years, which would raise $103 million over 10 years.